Capital markets rebound offsets U.S. banks' weakness
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The U.S. banks managed solid first-quarter results, as strong fee income and cost control combined to offset continued pressure on net interest income. Net interest margins came under increased pressure in the first quarter, and loan growth was weak, particularly for commercial lending. However, the revival in capital markets activity produced strong revenues that helped offset this weakness in lending. Debt issuance surged in the first quarter, with investment grade new issue activity reaching near-record levels, along with a pickup in merger and acquisition activity, high-yield debt issuance, and syndicated loan activity. Looking ahead, net interest income is expected to start growing once again in the second half of the year. Turmoil in commercial real estate intensified in the first quarter, and troubles in commercial real estate are expected to weigh on results in the coming months. However, given the strength in banks’ capital positions, their high loan-loss reserves, and strong earnings power, any fallout is expected to be manageable. The banks’ capital ratios are generally stable, and regulators are anticipated to increase their capital requirements in the near future. Green bond issuance rebounded in Q1 according to Moody’s.

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